Gold has captivated humanity for roughly 6,000 years. Whether it be Egyptian pharaohs, British royalty or those excitable folks on the goldismoney.com message forum, the collective fascination with the yellow metal is clearly here to stay. It’s a topic Canadian author Matthew Hart digs into in his new book Gold: The Race for the World’s Most Seductive Metal, which will be released Tuesday. He sat down with the Financial Post’s Peter Koven to discuss the colourful and turbulent business of gold mining.

Financial Post: When you look at the gold mining industry from thousands of years ago to modern times, what themes keeps repeating themselves?

Matthew Hart: Gold rushes, first of all. They have always been one of the great drivers of the gold world. Periodically, the world either makes a great discovery or develops an overwhelming desire for gold. The first great gold rush was the discovery of the New World. If you go back to the year 1400, Europe is running out of the gold, so they go looking for it. When the Spanish discovered the New World in their search, their cover story is that they were seeking souls for God. Christopher Columbus mentions God in his journals 26 times. Well, gold is mentioned 116 times. So what were they really looking for?

Another theme is gold is always there when things go to hell in a handcart. When the world is destabilized and in a state of flux, you find gold movements in and out of countries. Gold is the emotive metal. It’s the sentiment indicator. It parallels some of the most dramatic stages of human development.

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MH: For one thing, gold’s no longer money. That’s a big change. And as far as trading goes, it’s now a US$20-trillion a year market. Every day in London, they trade US$33 billion worth of metal. They can only do that because of one thing: the arrival of new mechanisms that allow for the swift, instantaneous trading of bullion. What really broke it open was a single product called the “Spider” (the SPDR gold ETF). That was invented in 2004. Within four days, it took in US$1-billion. So there was pent-up demand, not just for bullion but for bullion that was easy to buy. Suddenly, you could invest in bullion in any multiple you wanted. And you could dump it as quick as you wanted. That created the modern gold scene, where as much gold changes hands on the London bullion market in a single quarter as has been mined in history.

FP: That fact drives the gold bugs crazy.

MH: It does drive the gold bugs crazy. But “gold bug” is a big term. There’s the doctrinaire gold bug for whom gold is the only real money. They want to use gold as a monetary whip to castigate and control and corral governments. But you’ll also hear a lot of people say that they’re a bit of a gold bug. They’re the ones who just like gold.

FP: Quite a lot of your book focuses on China becoming the dominant player in the gold business in the last couple of decades. Why did that happen?

MH: I think China’s story is the story of wealth looking for something to buy. They buy everything. Why wouldn’t gold be something they want? They have become the biggest gold producer and the biggest gold consumer. They claim to produce 370 tonnes of gold a year. And last month alone, they bought 131 tonnes. They don’t export any, so it stays there. They just suck it up.

If you look back, China had an agony over the gold business when the communists won the civil war in 1949. Because on one hand, gold represented this fantastic source of foreign exchange, which they desperately needed to buy foreign goods. And on the other hand, it’s the absolute symbol of everything they fought against: the landlord class, the bourgeoisie. In the Cultural Revolution, gold mining was brought to a complete stop. It was only with the death of Mao, and the suppression of the Gang of Four, and the advent of Deng Xiaoping and the reformers who transformed China into the China we know today that gold came into good grace.

In 1980, the government lifted all restrictions on mining gold because they wanted to stimulate gold production. Out into the countryside, poor people went looking for gold in every square inch of China. You had tens of thousands of small mines starting up, and they still have those. What that means is every possible flake of gold that can be hoovered out of the ground is being hoovered out of the ground.

FP: Including the illegal mines you hear about?

MH: I saw one in Inner Mongolia that was practically industrial in scope. It stretched for five miles along a river and they were in the hills doing open-pit mining. An illicit mine doing open-pit mining and running a heap leach. That’s industrial-scale gold recovery. And they were without a license! They were on a property that the legal mine I visited had rights to. They just couldn’t enforce it because of bribes and corruption. Not exactly a “stop the press” story in China.

That’s why there’s no doubt China produces more than 370 tonnes of gold a year. That’s the official figure. They’re producing a lot more than that because of the sheer number and uncontrollability of those illicit mines.

FP: You spoke to Peter Munk a number of times for this book. He’s now closing in on retirement. What were your thoughts on him?

MH: I was very impressed with Munk. He’s a very shrewd man, obviously. He built the biggest gold miner in the world from a $14-million gold mine in Northern Ontario.

I’ll tell you one of the things that impressed me. Munk was 84 when I met him in London. He had a big suite at Claridge’s hotel. He was sharp as could be. And he kept jumping up to take phone calls. We’d talk for a while, and then the phone would ring and he’d jump up to take a call and then sit down again. I found out a couple of months later that Barrick had been making their play for (copper miner) Equinox (Minerals). They’d been making the most significant change in strategy in the company’s history, and he was managing his interview while conducting this kind of business.

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